TMI Blog2012 (1) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ng been satisfied namely to encourage construction of houses, we are convinced that the utilization of the funds in constructing a residential house should be treated as sufficient compliance of section 54 and therefore hold that the appellant is entitled to the exemption u/s 54 even in respect of the amount invested by way of construction of the residential house - Decided in favour of assessee. - I.T.A No. 941/Mds/2011 - - - Dated:- 24-1-2012 - DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER For the Appellant: Shri R.Mahadevan, CA For the Respondent: Shri shaji P. Jacob, Addl. CIT O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: This appeal of the assesse, for assessment year 2007-08, is directed against the order of the ld.CIT(A), Coimbatore, dated 24.2.2011. 2. Briefly stated, the facts of the case are that the assesse, as individual, filed his return of income on 19.7.2007 for the year under consideration declaring total income of ₹ 3,77,560/- from salary received being employee of M/s Revathi Equipments Ltd. The assessee received ₹ 31 lakhs as sale consideration from his flat in Chennai [Flat No.2, Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and for the purposes of subsection91), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset. Accordingly, an amount of ₹ 9 lakh was paid towards purchase of a new house before filing of the return of income by the assessee but he has claimed the entire amount of ₹ 21.53 lakhs u/s 54(2) of the Act. But the Assessing Officer has found that only ₹ 9 lakhs has to be treated as exempt under this section and by treating the balance amount to be not chargeable to exemption, he has added back this amount to the assessee s total income. Aggrieved, the assessee went in appeal before the ld.CIT(A), who has also confirmed this addition. Now the assessee is in second appeal before us by raising following grounds: 1. The learned Commissioner of Income-tax (Appeals) in his Appellate order ITA 451-C / 2009-10 dated 24.02.2011 has upheld the addition made by the Assessing Officer while computing the income under the head Capital Gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in stating that the Appellant has not deposited the unutilized amount in an account with in Public Sector Bank. The unutilized amount has been deposited with State bank of India and the amounts have been withdrawn and paid to the Builder from the above Bank account. The learned C I T (Appeals) ought to have sympathetically considered the fact that a mere technical fault in not investing the unutilized Capital gains of ₹ 12,02,482/- in the specified Bank account as provided for under Section 54 (2), cannot make the Appellant disentitled to the beneficial provisions of Section 54. The CIT(Appeals) ought to have considered the legislative intention and scope of Section 54. In as much as the Appellant met the requirement of Section 54 the learned CIT(Appeals) is not justified in taking the prejudicial stand against the Appellant denying the benefit of Section 54 to the Appellant merely for the failure to deposit the unutilized amount in the specific account. He should have appreciated the fact that the Appellant had deposited the amount in a bank account and has been making payments to the Builder at various stages of construction as and when required. 6. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rendered a decision in the case of Shri Madhuvan Prasad in I.T.A.No. 2485/Mds/2004, for assessment year 1996-97, order dated 17.10.2005. In that case, under identical facts, it has been held that the claim of the assessee is allowable. Paragraphs 8 9 of the order are relevant and are being extracted herein below: 8. On the merits or the case, we have gone through the orders of the Tribunal cited by the learned AR. In the case reported in 85 TTJ 173, the assessee had advanced a sum of ₹ 2 lakhs for the purchase of the house and the advance was received back by the since the transaction did not materialize. The assessee in this case had sold the property on 4th January 1995 and advanced a sum of ₹ 2 lakhs on 16th April 1995 for purchase of the house. The advance was received back on 17th December 1995 and the assesse again entered into a fresh agreement on 6tll January 1996 for purchase of a flat and took possession thereof on 30th March, 1996 after paying the consideration of ₹ 4,01,000/-. In this case, though the Assessing Officer denied the exemption u/s.54F on the ground that the assessee failed to purchase another house before filing the return u/s. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest in the capital gain account scheme is only a technical default which given the circumstances and the peculiar facts should not be extended to such an extent as to deny the exemption u/s 54 when the ultimate purpose of the provision is achieved. To hold that the exemption should be forfeited for a technical breach does not appear to be the correct proposition particularly since the appellant pleads that he was not aware of the requirement ot invest in the capital gains account scheme and also states that his objective was to invest in a residential house which is apparent from the fact that he has purchased a land and also constructed a house thereon. It is also seen that section 54E (since deleted) and sections 54EC and 54ED which require investment of the proceeds in specified assets, specifically provides that the exemption would be forfeited if the specified asset is given as a security for taking loan. In section 54, we do not find any such provision and therefore in our considered view the purpose of section 54(2) is not to deprive the assesse of an exemption but only to avoid rectification. The ultimate object of the section having been satisfied namely to encourage co ..... 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